USD/JPY: Still Stuck in Triangle

By: DailyForex.com

In my last analysis of this pair one week ago, I ended by summarizing the situation like this:

<>“...we are currently stuck within a consolidating triangle, and we are going to need a close beyond one of the black trend lines shown in the chart above to be more confident of direction.

<>The very long term trend is bullish, the medium term trend is bearish, the short term trend is bullish.

<>It should be profitable to look for shorts near the upper trend line, and longs at the support level and/or lower trend line, until we get a decisive break of one of the trend lines.”

The prediction worked out very well, but only in keeping us out of useless trades, as the price has not been near either of the triangle's trend lines, as we can see from the daily chart below:

The actual price action over the last week is very inconclusive, there is really nothing to say about these daily candles except there is some support at around 97.00 and some resistance at around 98.00. The real key levels are the triangle's trend lines. The good news is that this triangle has been building for quite a while, and when we finally do get a breakout, it is likely to be very tradable, just as the breakout of the previous triangle was at the end of last month.

Apart from the triangle trend lines, a good bullish reversal on the intraday chart at around 97.00 could be a tradable long.

I recommend trading reversals from the triangle trend lines, or any directional breakout confirmed by a daily close beyond either line. Waiting for a retest of the trend line from the other side could work well, as it did after the last triangle breakout. The triangle is going to have to break by the end of August, and will most likely happen before the end of next week.

< style="font-family:arial,helvetica,sans-serif;">It is worth taking notice that the JPY is also in long-term technical triangles against the EUR and GBP, but is strong against the AUD (as is everything else). So it seems that it is JPY that is really the engine of the consolidation. This tells us that until we get a breakout of the triangle, the real trading action in the world of forex is likely to be driven by USD or other currencies.